Abrupt Ouster Of CBRT Chief Finds Fertile Ground For Denting Risk Appetite

Turkish Pres Erdogan's surprise decision to oust CBRT Gov Agbal sent the lira tumbling in early Asia-Pac trade. USD/TRY wiped out four months worth of losses amid thin liquidity, despite touted action by Turkish state banks, before gradually trimming gains through the rest of the session. Erdogan's move coupled with a number of press reports flagging renewed (geo)political tensions on several familiar fronts kept risk appetite at bay.

• Demand for safe haven currencies pushed JPY to the top of the G10 pile. USD/JPY dipped after the re-open with some linking the move to the suspected unwinding of TRY/JPY positions by "Mrs Watanabe" (Japanese retail accounts." Subsequent recovery attempt allowed the rate to briefly return to neutral levels, but proved short-lived. Worth noting that $1.1bn of USD/JPY options with strikes at Y108.75 expire today.
• AUD went offered and continued to lag all of its G10 peers as broader risk-off flows overlapped with large floods in NSW as well as softer oil & iron ore prices. A BBG trader source pointed to demand from local exporters who bought AUD for repatriation, helping the currency move off worst levels.
• CAD held up well despite a weaker commodity complex, even as was the second worst performer in the G10 basket. The loonie ignored headlines noting that Canadian CP Rail agreed to buy Kansas City Southern for $25bn, in the largest acquisition of a U.S. asset by a Canadian company since 2016.
• GBP weakened as the UK's spat with the EU over Covid-19 vaccine supply escalated and the two sides publicly traded barbs over the issue.
• PBOC fixed its central USD/CNY mid-point at CNY6.5191, in-line with sell side estimates, and left its 1-Year & 5-Year LPRs unchanged. USD/CNH re-opened a touch higher, after the weekend saw PBOC Governor Yi note that the central bank still has space to expand liquidity.
• The global data docket is rather light today, includes U.S. existing home sales. Central bank speaker slate features Fed's Powell, Barkin, Daly, Quarles & Bowman as well as ECB's Knot, Weidmann, Schnabel & de Cos.